Suppose that you are the manager and sole owner of a highly leveraged company. All the debt

Question:

Suppose that you are the manager and sole owner of a highly leveraged company. All the debt will mature in one year. If at that time the value of the company is greater than the of the debt, you will pay off the debt. If the value of the company is less than the of the debt, you will declare bankruptcy and the debt holders will own the company.
a. Express your position as an option on the value of the company.
b. Express the position of the debt holders in terms of options on the value of the company.
c. What can you do to increase the value of your position? Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...